Introduction The Wall Street Journal Research Project was a great way to familiarize myself with Gateway Inc. and other computer companies.  I recently purchased a Gateway computer and wanted to find out more about how I invested my money.  I learned a lot about researching with The Wall Street Journal. I also reviewed  how to format and link images in web pages.  In a world based on technology, it is a helpful skill to know.

 

Value Added: 1.  Articles are arranged by date in order to follow developing stories 2.  Table of Contents with links to each article and links back to table of  contents 3.  Graph of Gateway in the New York Stock Exchange for past 3 months. 4.  External links and image links to the various companies listed. 5.  Gateway banner with live links 6.  Article Rating System

Table of Contents:
 

History	Article 1	Article 2	Article 3
Article 4	Article 5	Article 6	Article 7
Article 8	Article 9	Article 10	Article 11
Article 12	Article 13	Article 14	Conclusion

 

Rating System of Articles: Average:  Good:  Excellent:

 
 

Gateway History Gateway was started on a little farmhouse in Iowa by Ted Waitt and Michael Hammond in 1985.  Since then it has grown into a $9.6 billion Fortune 250 company that employs 21,000 globally.  Gateway has always been trying to "humanize the digital revolution."  Gateway feels they are about treating clients well, giving good advice, making great products and service, and genuinely caring about customers. Gateway offers not only hardware but financing, Internet service, a personalized Internet portal, peripherals, software, and training and service.

 

1.  McWilliams, Gary. "Gateway Names Chairman Waitt To CEO Post, Succeeding Weitzen," The Wall Street Journal, January 30, 2001, pg. A:4.  Rating:  After leaving for 13 months, Ted Waitt, CEO of Gateway is returning to the company.  He is succeeding Jeffrey Weitzen, previously an AT&T executive.  Shares went up 7% as a result.  Waitt, the original founder of Gateway in 1985, owns 31.8% of Gateway.  He said his shares were down over $4 billion in less than 2 years.  Weitzen lead the company toward software, Internet access services, and expanded retail stores, which only increased home PC sales.  When Gateway did not cut prices to match Dell Computer Corporation's, sales fell 15%.  Also as a result, Gateway will lay off 3,000 people this coming year.

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2.  Snel, Ross. "Gateway CEO Waitt: Top Priority Is Enlarging Business," Dow Jones Newswires, January 30, 2001. Rating:  To turn the economic degress of Gateway around, Ted Waitt wants to focus on costs, growth and pricing.  He claims is "top priority" is to enlarge the business.  Gateway has been in rough competition with Dell Computer Inc. who has been cutting the prices on their computers.  Under Weitzen's management, stocks fell in a year from $75.13 to a low of $15.30.  Among other changes, Joe Burke was named chief financial officer.

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3.  McWilliams, Gary.  "New Gateway CEO Waitt Names Early Associates to Senior Posts," The Wall Street Journal, January 31, 2001, B:6. Rating:  The day after Ted Waitt returned as CEO, he replaced six executives with executives from his earlier committee.  During a conference call with investors, Waitt said he will revive PC sales while cutting expenses.  He said his "top priority is to grow this business."  Continuing to keep open Gateway Country Stores, he will "reexamine" planned additions to the stores and close a few that do not turn profit.  He plans to release a plan for the company next month (February 2001).  Waitt owns 31.8% of stock in Gateway that lost $4 billion in value last year.  New executives includes chief financial officer Joe Burke, Bart Brown who became senior vice president of consumer units and Michael Hammond who was named senior vice president of operations.  Waitt returned because of his unhappiness with Gateway's performance.                                                                                                               Joe                                                         Bart                                                       Michael Burke                                                   Brown                                                  Hammond

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4.  Tam, Pui-Wing.  "PC Growth in U.S. Hits Slowest Rate Seen in Seven Years," The Wall Street Journal, January 24, 2001, A:4. Rating:  Personal PC market is at it's lowest in seven years.  Reasons include PC saturation, everyone already has one, and the stock market downturn.  Gateway has announced layoffs and reported low fourth quarter results.  Apple Computer Inc. has also experienced short earnings.  In the market, Dell and Hewlett-Packard suffered less of a loss than Compaq and Gateway.

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5.  McWilliams, Gary.  "Gateway's PC Sales Plummeted at End of Year, and It Plans to Lay Off 3,000," The Wall Street Journal, January 24, 2001, pg. B:6. Rating:  Fourth quarter PC sales fell 15% from earlier levels.  Falling below already low estimates, they are going to restructure company sales and reduce costs in manufacturing.  Included in the plans is a 12.5% lay off of its 24,000 employees to bring the company into the new plan.  Hewlett-Packard is also claiming falling sales and "worsening economic condition."  In November, Gateway made computer industry cuts and shortly after so did Apple Inc., Compaq Corp., and Micron Electronics Inc.  Due to the slow sales, Gateway is slashing their prices immediately.  Gateway plans to redesign its product line in Asia because Japan likes the smaller, sleeker design of a more compact computer.

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6.  By a Wall Street Journal Staff Reporter. "Gateway Is Expected to Sever Its Ties With McCann-Erikson," The Wall Street Journal Interactive Edition, February 7, 2001. Rating:  McCann-Erickson has been the ad agency of Gateway for three years but that is expected to end soon.  Gateway spent $231.3 million on ads in 1999 through McCann who produced "folksy ads."  Gateway is supposedly talking with Fallon in Minneapolis, but that is not confirmed.  Henry Corra, a documentary filmmaker, made commercials last year that featured CEO and founder Ted Waitt.  The  "People Rule" campaign, which was created by McCann, started a new campaign with Michael J. Fox as the spokesperson.

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7.  By a Wall Street Journal Staff Reporter.  "Firms Tied to Elonex File Patents Lawsuits Over PC Monitors," The Wall Street Journal, February 15, 2001, pg. B8. Rating:  Elonex IP Holdings Ltd. and EIP Licensing BV filed 20 lawsuits against computer monitor makers; Compaq Computer Corp., Gateway Inc., NEC Corp., Daewoo Electronics Co., and Acer Display Technology Inc.  The firms claim the defendants make monitors that shutdown when not in use to save power, which is an infringement on patents from Elonex and EIP. Elonex has filed suit against other companies in the past for infringing on their lawsuits.  Companies like Hewlett-Packard Co., Nokia Corp., and Hitachi Ltd.  Analysists believe the companies will challenge the validity of the patents.

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8.  Hamilton, David P.  "Faulty Software Disables Modems on Hewlett and Gateway Laptops," The Wall Street Journal, February 23, 2001,  Rating:  At midnight on February 21 certain Hewlett-Packard and Gateway notebooks froze up due to faulty software.  A "modem driver" caused users not to be able to place outgoing calls.  ESS Technology, who makes the driver, said it "has a bug in it."  There was a similar problem two years ago that led to this problem.  It is only in certain versions that use the latest Microsoft Windows models ME, 2000 and NT.  New versions of the drivers will be available online through Hewlett and Gateway, with a cheaper version being offered from ESS Technology.  Customers will have to reset their computers to February 20 and the download the new drivers.

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9.  Fuscaldo, Donna. "Gateway CEO: Lowest Cost Structure Key to Future of Company,"  Dow Jones Newswires, February 28, 2001. Rating:  Ted Waitt, at the 2001 Gateway Analyst Meeting, says things have to be eliminated that are not necessary for the future of Gateway and need to get to a low cost structure.  Elimination's will come from customer segments and product lines.  After take back CEO, Waitt started to simplify its products.  "We can't offer an infinite choice to our customers and be extremely competitive in the market," Waitt said.  Waitt says changes will increase gross margins.  He also wants to increase PC profitability.  Gateway is going to take the opportunity to be different with service and support by having it be quality, which no one really has.  Gateway is also going to promote Country Stores more instead of promoting online and telephone sales. They hope to have a ad campaign ready around St. Patrick's Day 2001 for Gateway Country Stores.  Hoping to promote "beyond the box" sales, which are attachments and other computer hardware, Gateway will add hardware items and inveigling in the second quarter of the year, a network attached storage.  This will be more for small and medium sized business.

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10.  McWilliams, Gary.  "Gateway Co-Founder Starts Comeback Plan With A Restatement,"  The Wall Street Journal, March 1, 2001, A;1, A:10. Rating:  On his first monday back CEO Ted Waitt relieved six executives of their positions and replaced them with his own men.  During former CEO's Jeff Weitzen rein, stock fell 75%.  Most people at the company feel Waitt is the man for his job and are excited about his comeback saying it will turn Gateway around.  A new policy on recognizing revenue which reinstated a lower revenue and net income for 2000.  Gateway had failed to account for investment in other companies and anticipated loss on the consumer loan portfolio.  Gateway expects losses till June while prices are cut.  Waitt said they do not expect to be at historic growth/profitability till 2002.  While Gateway is trying to get back on its feet, Dell is stealing Gateway customers and became third for PC sales, following Hewlett-Packard and Compaq.  Waitt's plan is to offer less products, do their own ads and market Gateway Country Stores better.  They are also going to pull out of European countries that are not doing well.  Closing charges for these branches could be close to $275 million.  Gateway sold $500 million in consumer loans, laid off 3,00 and pulled out of some Office Max's, all to cut expenses and raise revenue. Waitt tried to sell Gateway to Compaq a few years ago.  After a no deal, Waitt hired Jeff Weitzen to take over as CEO while Waitt pursued personal interests.  Weitzen opened Country Stores and emphasized "beyond the box" sales like internet access and training.  Weitzen pushed for service which is why the company slipped.  With Waitt in charge, Gateway hopes to get "back to basics."

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11.  Goldstein, Matthew. "Smartmoney.com: Gateway's Silver Lining," Dow Jones Newswires, March 2, 2001. Rating:  Gateway is seeing some ugly months for shareholders.  Even though Gateway is cutting jobs and reducing earnings estimates, they are also ending their risky consumer finance business, which is a good thing for shareholders partnerships with major credit card companies.  Two thirds of Gateways consumer loan portfolio  was sold for $500 million to an unknown buyer.  This is a win win situation for Gateway because it gives them immediate cast and puts less risk on Gateway for defaulted loans.  During this time of economic slowdown PC sales need to be boosted.  Waitt hopes this credit card financing approach will alleviate pressure and risk from customers who can't pay back debt.  Getting rid of the financial loan business allows Gateway to start boosting those needed PC sales.

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12.  Bulkeley, William W.  "IBM Turns Around Its PC Unit, Though Skeptics Still Call It A Drag," The Wall Street Journal, February 15, 2001, B:1, B:4. Rating:  When Robert Moffat Jr. took over as head of PC operations at IBM in July 2001, he threw a party for everyone telling them that when they showed a profit in the next quarter, he would throw another party.  As planned, profits went up  and there was another party.  As other PC companies face a slowdown of sales, IBM made a turnaround which included a $1 billion annual cost cut.  IBM also started to focus more on corporate sales with servers and laptops that networks use.  Switching to online sales contributed to one fourth of IBM's sales last year also.  Overseas sales are booming for them after taking the lead in laptops from Toshiba Corp.  Going from retail sales to directly selling to the customer has been helpful also because when sales slow, IBM can take quick actions to turn it around instead of waiting for results from sales.

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13.  McWilliams, Gary.  "Dell to Pursue Price War as Net Flattens," The Wall Street Journal, February 16, 2001, A:3, A:4. Rating:  To compete in the price war of computer sales, Dell Computer Co.  had to lay off employees and reported fourth quarter net income was down.  Chief financial officer James Schneider commented that first quarter fiscal will not meet its estimates and the company needs to "be very cautious."  As a result of the decline in sales, they are laying off 4% (1,700) to help keep up with price cuts the company has had to make.  Stocks are down and Vice Chairman Kevin Rollins says as try to gain more market share, the company will continue to see less profit.  Revenues are up though from $6.8 billion last year to $8.67 billion this year.  Rollins said the growth is "a continuation of our momentum and strong strategic position."

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14.  Bulkeley, William M.  "NEC, Cray Reach Supercomputer Deal for Sales of Japanese Machines In U.S," The Wall Street Journal, February 26, 2001, A:3. Rating:  As part of a deal between NEC Corp. and Cray, NEC will be allowed to sell their supercomputers for the first time in four years.  In 1997, Cray, then under different ownership, filed a complaint with the Commerce Department for dumping and the ruling stopped the sale of NEC supercomputers in the U.S.  NEC will invest $25 million into Cray who will market NEC supercomputers in the U.S.  It is believed this will be a good situation for both sides.  NEC vector supercomputers are looked at as the best in the world.  They  are used for vehicle and aerospace application and for freon-cooled machines in which scientists use for massive weather systems and modeling nuclear weapon explosions.  Vector supercomputers, in short, use high performance processors that work together to solve a problem.  Other companies have made machines similar with thousands of microprocessors that work together.  They are more inexpensive than vector supercomputers because the microprocessors are inexpensive.  IBM and Compaq are the leaders in the market for these types of fast computation computers.

Gateway lost mass amounts of money last year.  Right now they are in a turnaround phase with the original founder in charge again.  Competition has cut throat prices and a large share of the computer market.  "Beyond the Box" marketing, getting back into customer relations and cutting prices should bring Gateway back around.  I feel my investment in this research project offered me a lot of information on the computer I recently purchased and gave me a review in the Internet world on how to do web pages and format.